Harsh truths about the Federal debt, showing how Left & Right lie to us

Summary: Each presidential campaign season the federal debt becomes an issue, with the debate consisting largely of bogus soundbites. Each election sees that the federal debt has not only grown, but has grown faster than the US economy — with little to show for it (e.g., our public infrastructure rots). This will not end well for us.

The big picture: the ratio of federal debt to GDP

First insight: massive debts can be paid down with steady growth and moderate inflation (especially easy with long-maturity fixed rate debt), proving that conservatives forecast of certain debt doom are false. Second insight: this trend will cause problems if not stopped (left-wing economists will deny this until the crisis begins).

Focus on events since 1980.
See how the government’s debt to GDP ratio rose under Reagan & Obama.
See America’s steady bipartisan leadership!

Third insight: we’ve lost control of the Federal budget. Keynes said that we should fight recessions with fiscal deficits, with the debt paid off during the following expansion (conservatives lie about Keynes’ advice). Reagan ran the first surge in deficits during an economic expansion, along with Bush Sr. raising debt/GDP by 18 percentage points in 8 years. Obama has done even more, raising it by 23 percentage points in almost 6 years.

Retiring boomers will put even more pressure on the government’s finances. Yet amidst all this spending, Federal spending on infrastructure has fallen from its low levels while our public infrastructure decays (3rd world nations don’t just happen; they’re made by bad policy). Fourth insight: we could be borrowing at almost zero interest to rebuild America — boosting our economy.

#5 is bad news: foreign ownership of US treasuries has skyrocketed.
We no longer “owe it to ourselves”.

#6 is good news: net federal debt is much lower than gross debt.
Net is the Federal debt excluding debt held by government agencies,
such as social security, Federal pension funds, and the Fed.

This is a more useful measure of the federal debt. (Write a billion dollar IOU to yourself. Are you buried in debt?) Reagan and Bush Sr. boosted the net debt/GDP by almost 18% over 10 years. Obama boosted it by almost 14% over 6 years.

With net debt at 60% of GDP, US debt is moderate by international standards. For a more accurate picture of the federal government’s obligation, we need to know its liabilities — debt plus future obligations. Legally-binding ones, like unfunded obligations for pensions (vets and civil service), and non-binding ones (medical care for vets, civil service retirees, the poor and elderly). These are massive, especially the health care obligations, but difficult to calculate.

Conclusions

The federal debt is a serious problem. The deficit is a bleeding sore, as the debt increases in both good times and bad — with future problems guaranteed as the boomers age and interest rates rise (which they will, eventually).

But we find it difficult to see the situation because the left and right lies to us (they believe us to be gullible because we are). We cannot respond effectively to a problem we cannot clearly see. When we respond with anger to lies, then people will treat us as citizens.

6 thoughts on “Harsh truths about the Federal debt, showing how Left & Right lie to us”

This is what happens when a government becomes bloated with unaccountable bureaucrats that make their own laws and that can never be held responsible for their actions..The U.S. government needs to downsize by 50% and get the $#%^^ out of the way of business !

(1) “with unaccountable bureaucrats that make their own laws and that can never be held responsible for their actions”

Wow. That bears zero resemblance to the US.

(2) 60% of US Federal spending is social security, medicare, and the social safety net. 20% is the military (plus some funding scattered in other categories). 6% is interest on the debt. 14% is the entire rest of the government. You want to cut 50%? Good luck with that.

The federal bureaucracy is definitely unaccountable. And it definitely makes a large fraction of the laws — many of the most important pieces of legislation in recent history, from Dodd-Frank to Obamacare, are primarily composed of rules made by the bureaucracy (in a drawn-out, corruption-ridden process free from democratic checks and balances) rather than specific directives from the legislature. There is so much “administrative law” that some commentators like Charles Murray have called for mass campaigns of civil disobedience as the only feasible approach to political reform.

Wow. That’s too bizarre for comment. I suggest you talk to some bureaucrats. They usually bend like the wind in the face of pressure from powerful interest groups in their field. Or they’re overridden by political appointees. Or overturned by action by Congress or the Courts. Lot’s of accountability to America’s stakeholders.

The administrative law serves the interests of these stakeholders — or is usually changed or removed, except in the rare cases of public interest and pressure.

The phenomenon of regulatory capture you’re pointing out is an *example of* not a counterexample to bureaucratic unaccountability. And there are vast swaths of the executive branch that seem to be virtually immune from legislative or judicial oversight — the National Security bureaucracy is a great example.

Agencies are not captured by the Blue Fairy waving her wand. Regulatory capture shows Executive agencies’ responsiveness to external forces, because people in it who act against the external forces (typically, but not always, corporations) are crushed. Senior executives of the agencies who play ball have lucrative careers after their retire. For example, look at how Wall Street manages its regulators (to say they are “unresponsive” to the global investment banks is laughable).

The Deep State consists of powerful Congressional representative who are part of it, along with the private sector corporations whose cash powers it — and private individuals whose needs it serves. Try talking with officers in the military who attempted to fight the defense corps — it is an almost guaranteed career killer.